AT&T to end 2G service, offers free 3G phone upgrades

Recently AT&T 2G customers in the New York metropolitan area began receiving notices regarding their GSM service: “Your current, older-model 2G phone might not be able to make or receive calls,” the letters read, “and you may experience degradation of your wireless service in certain areas.” Although AT&T has issued no explicit statement that it will be shutting down service for its 2G users, the company has publicly lamented its need for additional wireless spectrum, and it may be borrowing a page from T-Mobile’s playbook in cannibalizing its 2G network for the benefit of future 4G LTE service.

In its hunt for additional network capacity, AT&T was willing to pay a handsome sum ($39 billion) for T-Mobile, mostly in order to gain access to that carrier’s wireless spectrum — if the deal hadn’t fallen apart under the intense scrutiny of federal regulators, it would have made the AT&T/T-Mobile behemoth the largest wireless provider in the nation. Instead, AT&T was forced to concede billions in cash and valuable spectrum to T-Mobile as part of a “breakup” fee, and that very AWS spectrum will form the future backbone of T-Mobile’s 4G push. The reality of the deal, however, is that AT&T may have bet the farm that the merger would be approved — in forfeiting spectrum, it is surely worse off than it was before the takeover attempt.

So AT&T, like T-Mobile, is in the position of having to do more with less. In 2011, mobile traffic was up 175 percent, an almost 3-fold increase, according to a report by the networking giant, Cisco. By 2016, the company estimates that mobile broadband traffic will have grown by 16 times, a compound annual growth rate of 75 percent.

With the recent announcement that the FCC will put more wireless spectrum on the auction block, AT&T will likely have the chance to put its money where its mouth is and buy its way to a more robust network — however the nature of the FCC’s “incentive auctions,” mean that spectrum will only get sold if TV stations decide to give up their rights to the airwaves they currently hold — meaning it’s impossible to say how much spectrum will actually be available to wireless carriers. And the auctions won’t help AT&T’s short-term 4G rollout, as a date hasn’t even been tentatively set for them at this time.

When asked about the letters sent to current 2G phone users, AT&T spokesman Mark Siegel downplayed the action, telling Market Watch that “we’re simply urging them to upgrade to a new device if they want to,” and stressed that as of this time, the program is completely voluntary. “We are still supporting the 2G network,” Siegel maintained, although he admitted that “customers using 2G cellphones that operate on 2G networks on the 1900-megahertz band eventually would lose all service,” according to the Market Watch report.

To help encourage 2G phone owners to step up to a 3G plan, AT&T is offering them free upgrades to phones such as the 3G Samsung Evergreen.

Although it’s doubtful that AT&T will completely close down GSM — GigaOM has reported recently that AT&T and Nokia are working on M2M technologies that rely heavily on the GSM network — the next likely step is that AT&T will begin sending letters like this one to further bandwidth-strapped metropolitan areas, hoping to convert 2G users with honey instead of vinegar. Eventually however, AT&T will probably move to more punitive measures if it can’t get its 2G holdouts to upgrade, a tactic it has used before: Cingular — AT&T’s precursor company — began charging its estimated 4.7 million TDMA users a $5 monthly surcharge when it decided to completely shutter that network in favor of GSM.